Background
In 2018 Tesla's board proposed – and shareholders approved – a 10-year pay package for Elon Musk that was worth roughly $56 billion in 2024. Following a shareholder lawsuit, a judge invalidated the 2018 compensation plan, calling it “an unfathomable sum.”
Tesla is appealing the case to the Delaware Supreme Court and in the meantime awarded Musk an “interim” pay package valued, at the time it was granted, at roughly $29 billion – without seeking shareholder approval.
Now Tesla is proposing a new compensation plan for Musk – one that could make him the world's first TRILLIONAIRE.
Tesla shareholders can vote on this proposal. When deciding how to vote, here are some things they should know.
Tesla's new pay proposal for Musk: $1 Trillion
In May, Tesla's board formed a special two-member committee to consider a new pay package for Musk. The new proposal, which is also subject to a shareholder vote at Tesla's shareholder meeting on November 6th, is far more outrageous than the one the Delaware judge already blocked. It could literally be worth up to a trillion dollars should Musk hit another set of ambitious goals. The compensation plan requires Musk to remain at Tesla for at least 10 years to receive the full payout – which means the pay package is worth, on average, $100 billion per year.
In order to unlock the full amount of shares proposed in this compensation plan, Tesla's value would need to increase dramatically to $8.5 trillion. As Tesla's proxy statement points out, that would make Tesla roughly 2x as valuable as the most valuable company in the world (Nvidia) today.
Arguably, growing Tesla's value to double the value of Nvidia would justify paying Musk something like double the compensation of Nvidia's CEO. But the annual value of Musk's trillion dollar pay package isn't just 2 times what Nvidia's CEO made last year (just under $50 million); it's more than 2,000 times what Nvidia's CEO made last year.
Yes, at his current compensation of $49.9 million, it would take Nvidia's CEO over 2,000 years to earn the amount that Elon Musk could earn, on average, per year for the next ten years.
The median annual compensation of other employees at Tesla is $57,243; an employee making that amount would need to work for over 1.7 million years to earn what Elon Musk would take home per year under this plan.
Let's be clear, Musk already owns nearly 20% of Tesla's outstanding shares, and would stand to benefit a great deal from an increase in Tesla's share price, even without this new compensation plan. Rewarding Musk to the tune of up to $1 trillion would give him too much of the pie at shareholders' expense.
